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Federal Budget Won’t be Fixed with a Sleddgehammer – ACOSSFriday, 29th November 2013 at 2:32 pm

A “quick fix” won’t restore the Federal Budget, the national peak body for social services has warned the Coalition Government in its submission to the Commission of Audit.

The Commission of Audit was established by the Federal Coalition Government in October as an independent body to review and report on the performance, functions and roles of the Federal Government.

The first phase of the review is due by the end of January 2014, and the second phase by the end of March 2014.

“ACOSS understands we face a big challenge to balance the budget and meet the community’s expectations with falling revenues and an ageing population,” CEO Dr Cassandra Goldie said.

“But it won’t be fixed in one hit, and certainly not with a sledgehammer.”

In the ACOSS submission, the key recommendations are:

Restore government revenues to pre-GFC level (25.1 per cent of GDP) and keep expenditures below this level, as a short term goal whilst the economy is growing at or above trend;

Protect the people who are the most vulnerable from further government retreat;

Affirm primary role for government in securing essential services;

Include social infrastructure and improving jobs for people disadvantaged in productivity and job creation measures by government;

Target income support to those in need and Invest more in prevention;

Fill major gaps in the social safety net as high priority;

Realign poorly targeted expenditure to these priorities;

Close tax loopholes and shelters that benefit high income earners;

Include both direct and indirect tax expenditures;

Commence national dialogue on community expectations.

“The reality is that previous governments spent the revenue windfall from the housing and mining booms of the 2000s on eight successive income tax cuts and a range of cash bonuses and poorly targeted programs,” Dr Goldie said.

“This was something we couldn’t afford and has led to our current fiscal challenge.

“Australia is a low taxing, low-spending country by international standards – the third lowest in the OECD as a proportion of GDP (at 37 per cent). Public revenue is also the third lowest in the OECD (32 per cent of GDP). The deficit is due more to a decline in revenue than a rise in spending.

“Pending a comprehensive review of current unmet needs and potential savings, in the short to medium term, we are proposing that expenditures should be capped at the level of revenue obtained before the GFC (25.1 per cent of GDP), and tax revenues restored to that level as the economy grows.

“This would enable the Government to restore the Budget to surplus without cutting essential programs. On the expenditure side, major structural reform is needed to replace wasteful programs with more efficient ones, and to shift the focus from curing problems to preventing them.”

Dr Goldie said the Commission of Audit should begin a national dialogue about public expectations of Government that poses some tough questions.

“Can we afford to meet the community’s reasonable expectations of health and aged care services for an ageing population if less than one in five people over 64 years pays any income tax, due to superannuation and other tax breaks?,” Dr Goldie said.

“Should a couple with a million dollars in assets in addition to their home receive an age pension and associated concessions?

“Should a family earning $120,000 receive the same ‘Schoolkids Bonus’ as one on $40,000?

“What can we do now to prevent future epidemics of chronic illnesses related to obesity, and the associated rise in hospital expenses?

“How do we restructure tax breaks for housing such as negative gearing to stem inflation in the cost of housing, and redesign subsidies for health care and child care to stem inflation in the cost of those services?

“At the end of this process the community will be looking for the Commission to identify the big questions that we need to resolve as a nation. If we want government to deliver quality essential services and infrastructure, we need a new consensus about how to put our nation on a path to sustainability.”